CHICAGO Service center operator and energy products distributor Russel Metals Inc.s earnings fell in the third quarter due in part to lower pricing levels.
The Mississauga, Ontario-based company posted net income of Canadian $18.9 million ($18.1 million) for the three months ended Sept. 30, down 15.6 percent from C$22.4 million in the same period last year on revenue that decreased 11.8 percent to C$796.8 million ($764.1 million) from C$712.6 million.
Russel said it sees the steel market as stable but expects economic uncertainty to prevail in 2014.
The company acquired two energy sector companies this year for C$11 million ($10.5 million) and established two new stores in Texas.
Russel will likely close another acquisition and erect additional stores in Canada before year-end, president and chief executive officer Brian R. Hedges and executive vice president and chief financial officer Marion E. Britton said during a Nov. 8 earnings call.
The pending acquisition consists of one large location in Alberta with roughly Canadian $50 million in annual revenue, the executives said.
Regarding organic growth, "We are doing greenfields in the U.S. because it was too expensive to buy (existing oilfield-supply stores)," Hedges said.
"We have seen economic uncertainty going on for a year now," Britton said. "Our current (steel) pricing is stable. In the energy business, drilling activity was lower in the third quarter than a year ago, but we expect (demand) improvements in the fourth and first quarters. Announcements (by some energy producers) indicate more activity will go on."
Britton said customers dont want to speculate on steel pipe prices and would rather "take more certainty in price," so import purchases have declined. "When we think there will be issues (with foreign supply), well stay away from countries that are dumping," Britton said.
"We think a trade case will be initiated in Canada" by oil country tubular goods (OCTG) producers, mirroring the anti-dumping complaint lodged in the United States this summer, Hedges said. "Until then, we do not expect large price increases."
OCTG pricing is stable, he said, "but with seamless and ERW (electric-resistance welded pipe) capacity coming on, there will be additional (downward pricing) pressure there."
In the flat-rolled market, prices are moving up, following scrap, executive vice president and chief operating officer John G. Reid said on the call. "Short term, there is not much downward pressure."